WRITTEN STATEMENT OF
COLLISTER JOHNSON, JR.,
ADMINISTRATOR
SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION
BEFORE THE
SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES
FEBRUARY 15, 2007
Chairman Cummings, Ranking Member LaTourette, Members of the Subcommittee,
I am pleased to be here today to offer the views of the Saint Lawrence Seaway Development Corporation (SLSDC or Corporation) regarding the opportunities and challenges facing Short Sea Shipping in the Great Lakes and St. Lawrence Seaway. Why is Short Sea Shipping important to the Seaway? Historically, this waterway has been a pathway primarily for bulk commodities. Yet, the Seaway serves the industrial and agricultural heartland of North America and could be used for the transshipment of containers to inland ports, thereby easing congestion in the rail and truck modes and strengthening the nation’s economy.
As background for the Subcommittee, the SLSDC is a wholly owned government corporation and an operating administration within the U.S. Department of Transportation. The SLSDC is a sister agency to the U.S. Maritime Administration and seeks to complement that agency’s leading efforts to promote Short Sea Shipping as a viable mode of transportation. The Corporation operates the two U.S. Seaway locks located in Massena, N.Y., and controls navigation in the U.S. portions of the Seaway. In addition, the Corporation is charged with promoting maritime trade into and out of the Seaway.
The Great Lakes offers tremendous and tangible possibilities for Short Sea Shipping in this country. It has a wealth of marine assets already in place to facilitate this type of commerce. It also has several established U.S. and Canadian companies and well-financed entrepreneurs who are making sizeable investments in marine transportation. In addition, the region is the location of the greatest international flow of goods anywhere in the world.
An additional reason for the SLSDC’s interest in Short Sea Shipping is the Department of Transportation’s focus on congestion mitigation as our most important policy initiative for the next two years. Secretary Mary Peters has charged each Administrator with seeking tangible solutions to the congestion problems facing this country. The Seaway is a major transportation resource with plenty of room to grow, a claim that few other transportation routes can make. We estimate that the Seaway currently operates at only 50-60 percent of its potential capacity where other modes of transport are straining under the weight of growing congestion.
The intense focus on Short Sea Shipping in the Great Lakes is the result of one simple fact – the level of trade between the U.S. and Canada represents the largest bilateral trade relationship in the world. In 2005, annual goods and services trade between the two countries was valued at $557 billion. According to the Canadian-American Business Council, Canada and the United States exchange goods worth an average of $1.2 billion per day. Canada buys nearly one-quarter of all U.S. exports of goods and no fewer than 37 U.S. states count Canada as their number one export destination.
The Ambassador Bridge, which links Detroit, Michigan, and Windsor, Ontario, annually carries more cargo by value than the entire U.S. imports received from Japan, our fourth largest trading partner ($128 billion vs. $118 billion in 2003). Figures from 2000, the most recent figures we could find, show that the Ambassador Bridge was the world’s busiest border crossing, accounting for 26 percent of the total 13.6 million annual commercial crossings between Canada and the United States. Since the passage of the North American Free Trade Agreement (NAFTA) in 1993, bilateral commerce between our two countries has grown at a 6 percent annual rate and is expected to continue performing at least as well into the future.
Needless to say, as a result of the enormous volume of Canada-U.S. trade, there is tremendous congestion at this country’s land border-crossing points. Traffic delays at the Ambassador Bridge of more than two hours during peak traffic periods are common. The congestion statistics for the border bridges in and near Buffalo, N.Y. are equally sobering. The costs associated with this congestion, in terms of lost productivity, wasted fuel, air pollution, and infrastructure degradation are enormous. For example, the Ontario Chamber of Commerce claims that the annual loss to the U.S. economy as a result of such congestion is $4.1 billion and notes that 73 percent of U.S. exports to Canada by value moved by truck. More than 37,000 trucks cross our northern border every day, a rate that works out to one truck every 2.5 seconds. With the cost of an idling truck estimated to be $150 per hour, more and more shippers are eager to explore a waterborne solution to a growing surface-congestion problem.
The Great Lakes are a vast inland sea with deepwater access to the world markets through the Seaway. The Lakes serve the population centers of all the major manufacturing states of the region: Ohio, New York, Pennsylvania, Illinois, Michigan, Indiana, Wisconsin, and Minnesota. Given this geographic fact, the volume of cross-border trade, and the acute congestion at the land border crossings, one would expect to find numerous marine ferry services between the Unites States and Canada carrying trailers, containers, and every imaginable form of commercial cargo. This, however, is not the case. In fact, the entire Great Lakes region has only one active Short Sea Shipping truck ferry service, the Detroit - Windsor Truck Ferry, which is a niche carrier ferrying hazmat cargo and oversize project cargo.
Why is there such a dearth of cross-lake, non-bulk Short Sea Shipping when it would appear that all the economic and geographic conditions needed for it to thrive are in place? I have asked many business executives, port directors, and other industry experts this question over the past three months since coming into this job. Based on these conversations, I believe that a large part of the answer to this question is that certain aspects of the regulatory framework created to address commercial navigation never contemplated Short Sea Shipping developing here as an option. Both the U.S. and Canada have several laws and policies that make it difficult, if not impossible, for Short Sea Shipping to prosper on the Great Lakes.
The Harbor Maintenance Tax (HMT) is the prime example on the U.S. side exemplifying this situation. Application of this tax encourages cross-border traffic to move by land rather than by water. The HMT was created in 1987 as a part of the Water Resources Development Act of 1986. The tax is currently imposed on most commercial cargo imported into the U.S. through ports where the Army Corps of Engineers has expended funds to improve or maintain such port. The HMT is vitally important to supporting the commercial navigation infrastructure of this country. Indeed, my agency is directly funded through the revenue raised through the HMT. Nevertheless, the HMT does not apply to cargo imported into this country over land. As a result, U.S. shippers moving goods into this country who have a choice will invariably move cargo in a truck over land, rather than in a ship over water, even if doing so means having to incorporate hours of delay at the border into their logistics schedules. These delay-related costs have, unfortunately, become part of the “cost of doing business” to ship goods over the border. They are also exacerbating land-based congestion at our northern border. Trucking companies we have talked to are fully supportive of cross-lakes truck ferry service because it allows them to achieve much greater productivity with their assets and drivers. Moreover, it is my understanding that since there is no appreciable Short Sea Shipping on the Great Lakes, the HMT produces virtually no revenue for the U.S. Treasury from this source. Consequently, it appears that if the HMT was removed or waived for Great Lakes Short Sea Shipping, there would be no appreciable loss of revenue to the U.S. Government.
Another public policy issue that adversely affects the development of Short Sea Shipping in the Great Lakes Seaway System is the 24 hours of advance notice required by U.S. Customs and Border Protection (CBP) for cargo traveling from Canada by water. There is no question that advance notice of imported goods serves a vital national interest. To ensure adequate security at our borders, CBP has adopted a policy that requires shippers importing cargo into the U.S. to provide information on what they are importing prior to the shipment’s arrival at a border crossing. In the case of a truck trailer, a shipper must provide CBP with advance notice of only one hour prior to arriving at the border crossing. For shipments moving by rail, the notice requirement is two hours. For a similar shipment moving into the U.S. via water where there is no driver on board, however, CBP requires at least 24 hours advance notice prior to the cargo being loaded into the vessel.
Over the past three months, I have met with the heads of various U.S. and Canadian companies who are interested in launching Short Sea Shipping services on the Great Lakes: Marine Link, which would operate a year round trailer ferry service from Hamilton, Ontario, to Oswego, N.Y. and from Port Maitland, Ontario, to Erie, Pa.; Great Lakes Feeder Lines which would transship containers through the Seaway from Montreal, Quebec, to Canadian and U.S. ports; and Hannah Marine, which would carry grain on tug barges through the Seaway to Wilmington, N.C. Based on these meetings and from my many years as an executive in the transportation industry, I believe that these companies are ready with the expertise, financing, and equipment needed to make Short Sea Shipping a reality on the Great Lakes within the next two years, but only if a workable solution to the two issues I have identified today can be found. They are ready to work cooperatively with the relevant U.S. agencies to satisfy their concerns in an effort to make Short Sea Shipping a viable option on the Great Lakes.
I would like to commend the Subcommittee for taking the time to focus its attention on Short Sea Shipping. Congestion is one of the greatest transportation problems facing our country today, and Short Sea Shipping offers a real solution to address this problem. Nowhere among our nation’s waterways is there a greater potential for using this form of waterborne transportation, and of reaping the safety, social, economic, and environmental benefits it can provide, than in the Great Lakes St. Lawrence Seaway System. The Corporation will continue to work closely with the Maritime Administration on this important initiative, as well as with other interested agencies.
Thank you again for this opportunity to appear before you today. I would be pleased to answer any questions you may have.